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from MacroScope:

A statement of non-intent

The flurry of activity about a G7 currency statement yesterday can now be put in perspective. It will almost certainly happen but it’s very much going through the motions.

We’ve been saying for a while that having urged it to reflate its economy for some time, Japan’s partners could hardly complain now that it is. Lael Brainard of the U.S. Treasury basically let that cat out of the bag last night, warning against competitive devaluations but saying that Washington supported Tokyo’s efforts to reinvigorate growth and end deflation.

What we’ll get is a bland recommitment to market-determined exchange rates and not much more.

So Japan is off the hook whatever the grumblings in Europe and will not face any serious brickbats at a meeting of G20 finance ministers and central bankers at the end of the week. France is grumbler in chief on this but has secured precious little support from its EU partners, most notably Germany which has already rejected President Francois Hollande’s call for a medium-term target to be set for the euro.

from Felix Salmon:

When the finance minister targets stock prices

Japan's economy has been far too stagnant for far too long: everybody can agree on that. The aging population, now used to deflation, prefers saving to spending -- an entirely reasonable stance if prices will be lower tomorrow than they are today. So the government has long been facing a very tough task: to change the psychology of a nation, basically. You can't do that -- as Japan learned the hard way -- with old-fashioned public-works spending. Instead, you have to target expectations.

The Bank of Japan started on this road last month, formally adopting a 2% inflation target. That was the BoJ's way of saying "start spending now, because your yen won't be worth as much tomorrow as they are today". And now the finance minister is doing his part to get the party started as well, in a highly unorthodox manner. In a speech on Saturday, he said that he wants to see the Japanese stock market rise 17% to 13,000 by the end of March.

from MacroScope:

Currency chatter

With the rhetoric getting more heated, the three-year market fixation on bond yields could well be supplanted by currencies in the months ahead.

This week, everything points towards the first meeting this year of G20 finance ministers and central bankers in Moscow on Friday and Saturday. We’ve already got a clear steer from sources that even though France wants the strong euro on the agenda there will be little pressure put on Japan and others whose policies are pushing their currencies lower. Having urged Tokyo to reflate its economy last year, its G20 peers can hardly complain now that it has. That is not to say there won’t be lots of words on the issue though.

from Breakingviews:

Tokyo stocks: this time could really be different

By Robert Cole

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Once bitten, twice shy. In fact, investors in Japan have been bitten many times by the seductive notion that the land of the rising sun is emerging from its bear-market night. They would be forgiven for shying away this time.

from Breakingviews:

Equity split from commodities may be short lived

By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The often close correlation between equity and commodity prices has faded. World equities are up 15 percent since August while commodities have barely moved. Is this a paradigm shift? Probably not, though shale gas is rattling energy markets. Equities may simply have run too fast on the back of quantitative easing while commodity investors have hesitated over global growth worries.

from Breakingviews:

Weak yen makes Japanese electronics firms giddy

By Peter Thal Larsen

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

Japan's assault on the yen has produced some clear winners: investors in the country's beaten-up consumer electronics industry. Shares in Panasonic jumped 17 percent on Feb. 4 after the group reported a less-severe-than-expected quarterly loss. The hope is that stronger exports and recent cost-cutting will transform earnings. But with revenue still shrinking, the recent rally is largely based on hope.

from Breakingviews:

Japan helps Nomura put a bad year behind it

By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Who wants to be a global investment bank anyway? Not Nomura. The Japanese financial group delivered a solid quarter-on-quarter boost in underlying pre-tax profit in the final three months of 2012, driven largely by a recovery in its home market. Last year’s insider trading scandal and subsequent resignations punctured the global dreams Nomura was pursuing when it bought parts of bankrupt Lehman Brothers in 2008. For investors, that may be no bad thing.

from Global Investing:

Hyundai hits a roadbump

The issue of the falling yen is focusing many minds these days, nowhere more than in South Korea where exporters of goods such as cars and electronics often compete closely with their Japanese counterparts. These companies got a powerful reminder today of the danger in which they stand -- quarterly profits from Hyundai fell sharply in the last quarter of 2012.  (See here to read what we wrote about this topic last week)

Korea's won currency has been strong against the dollar too, gaining 8 percent to the greenback last year. In the meantime the yen fell 16 percent against the dollar in 2012 and is expected to weaken further. Analysts at Morgan Stanley pointed out in a recent note that since June 2012, Korean stocks have underperformed Japan, corresponding to the yen's 22 percent depreciation in this period. Their graphic below shows that the biggest underperformers were consumer discretionary stocks (a category which includes auto and electronics manufacturers). Incidentally, Hyundai along with Samsung, makes up a fifth of the Seoul market's capitalisation.

from Breakingviews:

South Korea may need a rate cut to fight weak yen

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Japan’s weak yen policy could be South Korea’s biggest economic enemy this year. The strengthening won, which has risen 23 percent against the yen in the past six months, was partly to blame for the country’s anaemic GDP growth in the fourth quarter. It’s also putting the squeeze on manufacturers like Hyundai. Lower interest rates could help to ease the pressure.

from Breakingviews:

BOJ must now make its bold inflation goal credible

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

After more than a decade of feigning helplessness against falling prices, the Bank of Japan has finally signed up for combat duty.

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